Recent talks at the Moonshot conference, reported by TechCabal, highlighted the urgent need for the Central Bank of Nigeria (CBN) to approve the open banking framework in Nigeria. Industry leaders, including Adedeji Olowe, founder and CEO of Lendsqr, stressed that the CBN’s approval is the last step needed to start open banking in the country. According to TechCabal, this initiative, first proposed in 2017 and supported by key players like Sterling Bank, Flutterwave, and Paystack, has generated a lot of interest but is still waiting for formal approval from the CBN.
During the conference, Olowe pointed out the challenges in creating the necessary systems, regulations, and coordination among banks and other financial institutions. These challenges have caused delays in implementing open banking, which is becoming increasingly important, especially since it has been successful in countries like the U.K. There, open banking has created a competitive market among lenders, allowing consumers to access a wider range of financial services.
The CBN’s operational guidelines for open banking, released in March 2023, are a crucial step in addressing these challenges by setting clear rules for sharing data securely.Open banking has the potential to change the Nigerian financial sector. As Olowe explained, it enables banks and financial institutions to safely share customer data with third-party providers. This can lead to the creation of new financial products and services tailored to what consumers need. For instance, it could make loans more affordable and offer personalized budgeting tools, ultimately helping more people access financial services. With better access to customer data, lenders can understand risks more clearly and offer credit at lower prices, making lending fairer for everyone.
Furthermore, the focus on data privacy and consumer protection in the CBN’s guidelines is vital for building trust in the open banking system. During the Moonshot discussions, the National Data Protection Commission (NDPC) emphasized its commitment to ensuring that open banking follows the Nigeria Data Protection Regulation (NDPR). This regulatory framework will help protect consumer data while promoting responsible information sharing among financial institutions.
The significance of open banking in Nigeria is immense. It can spark innovation in financial technology and encourage healthy competition that benefits consumers. By allowing secure data sharing, open banking can empower both individuals and businesses, giving them access to tailored financial solutions and improving their overall financial well-being. As stakeholders wait for the CBN to take action, the potential of open banking to improve Nigeria’s financial landscape remains a hopeful prospect for a more inclusive and efficient future.
